Darden to buy Yard House for $585M

Darden Restaurants Inc. said Thursday it has agreed to buy Yard House USA Inc., operator of the 39-unit, high-volume, casual-dining chain Yard House, in an all-cash transaction totaling $585 million.

The Irvine, Calif.-based Yard House will join Darden’s Specialty Restaurant Group, which includes The Capital Grille, Bahama Breeze, Seasons 52 and Eddie V’s. Orlando-based Darden, which also operates the Olive Garden, Red Lobster and LongHorn Steakhouse casual-dining brands, expects to complete the acquisition in its second quarter of fiscal 2013.

Yard House reported fiscal 2011 systemwide sales of $262.4 million, an increase of 23.3 percent from the previous year, making it one of the five fastest-growing chains within the Nation’s Restaurant News Second 100 rankings of restaurant brands. The Second 100, which follows the rankings of the Top 100, will be published in the July 23 issue of Nation’s Restaurant News.

Yard House ended 2011 with 35 units and boasted an estimated sales-per-unit tally of $8.2 million, according to Second 100 research.

The brand was founded in 1996 by Steele Platt, Harald Herrmann and Carlito Jocson. Its varied American-fare menu and emphasis on beer fits into a high-volume, polished-casual niche currently unfilled in Darden’s portfolio — and a sector that Darden had hinted at playing within for some time.

“Steele, Harald and Carlito have created one of the most differentiated and exciting restaurant brands in America today, with average unit volumes and returns on capital that are among the highest in the industry,” Clarence Otis, Darden’s chief executive, said in a statement. “Guests in a number of different markets are responding to Yard House’s unique combination of hand-crafted food, premium beers and other beverages, thoughtful soundtracks, and elegantly designed restaurants. This combination has established Yard House as a great place for wide range of occasions.”

Otis added that the Specialty Restaurant Group would tally nearly $1 billion in annual sales with the Yard House addition and be positioned to reach annual sales growth targets of between 15 percent and 20 percent for the foreseeable future.

“The Specialty Restaurant Group is also significant because, in appealing to higher percentages of both younger and higher-income guests,” Otis said, “its brands round out Darden’s overall guest base in very important ways.”

Darden has recently been hit with sales slumps at its Olive Garden and Red Lobster chains. For the company’s latest quarter, ended in May, same-store sales at the 792-unit Olive Garden fell 1.8 percent and same-store sales at the 704-unit Red Lobster fell 3.9 percent.

Harald Herrmann, president and chief executive of Yard House USA, said the acquisition would let the Yard House brand realize its goal of becoming a national player. It currently operates in 13 states. Yard House was named a 2011 Golden Chain Award winner by Nation’s Restaurant News.

“We’re excited about the opportunity, and that we and our team members will become a part of one of the world’s largest and most successful restaurant companies,” he said.

Darden officials said acquisition-related costs of between 7 and 10 cents per share would be offset partially by Yard House’s earnings from continuing operations. Still, the purchase would dilute earnings per share in the current fiscal year by between 3 and 5 cents, the company said. Darden said it expects the acquisition to be accretive to earnings beginning in fiscal 2014.

Orlando, Fla.-based Darden Restaurant operates nearly 2,000 restaurants that generate more than $8 billion in annual sales.

Contact Mark Brandau at [email protected].
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